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UK infrastructure: an investment that connects us all
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Josh McCathie
Fund Manager
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The UK requires one of the largest infrastructure networks in Europe and its fortunes have crucial economic, environmental and social consequences for the country. Josh McCathie, of Downing Fund Managers looks at the UK’s infrastructure commitments, the funds behind the developments and the opportunity for investors.
Over the years, working patterns have changed, energy consumption has increased, technology has advanced and innovations have altered how we use transport. However, the purpose of infrastructure has remained resolute – to support the UK’s core needs throughout advancements in technology.
The pandemic has highlighted some of the consequences of underinvestment in the UK’s infrastructure. As a result, supply chains continue to come under great stress and wholesale energy prices have spiked due to the sharp economic recovery. The need for long-term investment in the sector has never been so important.
The value of UK infrastructure
The UK’s digital infrastructure is one of the strongest in the world, supporting a tech sector larger than the rest of Europe combined[1]. The country has responded to ambitious net zero targets by constructing the world’s largest offshore wind farm off the coast of Cumbria. However, these two examples only scratch the surface of the UK government’s focus on building an economically viable infrastructure.
Boris Johnson’s Ten Point Plan for a Green Revolution[2] initially outlined £12 billion of government investment into infrastructure projects. However, in just over 10 months, it has attracted over £5.8 billion of inward investment. The government predicts that the plan could attract up to £90 billion of private investment by 2030. The popularity of this particular initiative is clear to see.
The advancements towards net zero and supporting the 2030 UN Sustainable Development Goals (SDGs)[3] could open up £12 trillion of market opportunities, while creating 380 million jobs. Perhaps most importantly, action on climate change could generate $26 trillion of economic gain by 2030.[4]
The infrastructure sector is growing at a rapid rate, which presents an opportunity for private capital to play a pivotal role in supporting its development.
How investors can support the expansion
Private investors can play an important supporting role by providing funds to the underlying infrastructure asset managers to deploy into physical infrastructure projects and other essential services to society.
The Confederation of British Industry (CBI) has quoted[5] that every £1 investment in infrastructure creates £2.92 of wider economic benefits therefore investors could see positive social implications on top of potential financial rewards. Investment in infrastructure ensures the adequate provision of essential utilities, improvement in air quality from renewable energy generation, and increases in the supply of high-quality healthcare and social care developments.
In summary, investing in infrastructure can directly boost the economy and, in turn, a growing and fully functioning economy can create a platform to generate long-term, sustainable returns for investors and benefits for society.
Risk warning: Opinions expressed represent the views of the fund manager at the time of publication, are subject to change, and should not be interpreted as investment advice. Please refer to the latest full Prospectus and KIID before investing; your attention is drawn to the risk, fees and taxation factors contained therein.
Please note that past performance is not a reliable indicator of future results. Capital is at risk. Investments and the income derived from them can fall as well as rise and investors may not get back the full amount invested. Investments in this fund should be held for the long term and are higher risk compared to investments solely in larger, more established companies.
Important notice: This document is intended for retail investors and their advisers and has been approved and issued as a financial promotion under the Financial Services and Markets Act 2000 by Downing LLP (“Downing”). This document is for information only and does not form part of a direct offer or invitation to purchase, subscribe for or dispose of securities and no reliance should be placed on it. Downing does not offer investment or tax advice or make recommendations regarding investments. Downing is authorised and regulated by the Financial Conduct Authority (Firm Reference No. 545025). Registered in England No. OC341575. Registered Office: St Magnus House, 3 Lower Thames Street, London EC3R 6HD.
